Strategic Finance supports three methods of valuation. The Shareholder Value and Dividend Discount models are cash flow methods that provide information about the sources of value creation, the duration of the value creation period, and the discounted value of the future stream of cash flows. One of the limitations in traditional dividend discount models is that they typically relate cash dividends to earnings, an accrual accounting flow, which can mask capital structure and funding effects. The dividends a company can afford to pay depend upon the cash consequences of its planned sales growth, cash margins on sales, cash taxes, required working and fixed capital investments, constrained by its target capital structure. Strategic Finance captures these constraints and opportunities explicitly, providing support for your valuation assumptions.

The Economic Profit model is a “mixed” model (mixing cash flow and book value concepts) often called the Economic Profit Model. This approach discounts an expected cash flow in excess of a capital charge (cost-of-capital multiplied by the previous period's adjusted book value).

All three methods can compute identical equity values, given certain assumptions (e.g., keeping the ratio of market debt to market equity constant). In practice, the results of the models are often different, because the required assumptions have been ignored. Experienced practitioners not only can explain the differences (“small”, in most cases), but often gain insights by comparing the results from the different approaches.